Asian equities and currencies took a hit as mounting economic worries overshadowed market optimism about potential interest rate cuts. The MSCI Asia Pacific Index was on track for its most significant weekly decline in three months, following a lackluster response to China’s Third Plenary Session, which rehashed existing policy priorities without offering new incentives.
Chinese and Hong Kong stocks opened lower, reflecting investor skepticism about the impact of the Third Plenum. Meanwhile, U.S. futures saw a slight uptick after the S&P 500 dipped 0.8% on Thursday.
In the currency markets, most Asian currencies weakened against the U.S. dollar, with the Taiwanese dollar hitting its lowest level in over eight years. The selloff in chip stocks continued, fueled by concerns over potential new U.S. restrictions on sales to China. Taiwan Semiconductor Manufacturing Co.’s shares fell for a third consecutive day.
Barclays strategist Kaanhari Singh remarked, “The Third Plenum has proven to be a non-event for the markets. Without immediate, concrete impacts, equities are likely to remain volatile, caught between conflicting forces.”
U.S. Treasury yields remained stable on Friday after a modest rise of four basis points to 4.20% on Thursday. Australian yields mirrored this movement, while New Zealand’s yields saw little change.
The Japanese yen stabilized against the dollar following a decline the previous day. Japan’s June inflation data came in below expectations. The dollar index maintained gains from earlier sessions.
Recent U.S. jobless claims data indicated the largest increase since early May, signaling a potential cooling in the labor market and supporting expectations for a Federal Reserve interest rate cut. The Fed appears poised to lower borrowing costs in September, with Chair Jerome Powell expected to provide more clarity after the upcoming policy meeting.
Investors are also monitoring President Joe Biden’s standing in the Democratic presidential race, as he faces increasing scrutiny from top party lawmakers.
In Asia, market participants are keenly observing the repercussions of China’s Third Plenary Session. President Xi Jinping’s focus on “high-quality development” did not initially suggest major new measures to stimulate demand or address the property downturn.
Additionally, recent data revealed that Chinese investors sold a record amount of U.S. securities, both stocks and bonds, in May amid ongoing diplomatic tensions between the two economic giants.
Upcoming regional data releases include Malaysia’s second-quarter GDP and the Philippines’ balance of payments.
In corporate news, Samsung Electronics Co. has resumed negotiations with unions following strikes at its chipmaking facilities.
On the commodities front, oil prices edged lower due to concerns about potential Chinese growth slowdowns impacting consumption, while gold also experienced a decline.
